Despite the dismal nationwide economic trends, Florida's surplus lines insurance market still managed to show some signs of strength this year. For the first six months of 2009, Florida reported more surplus lines written premium than any of the five largest surplus lines markets in the U.S.
California, Texas, New York, and Illinois reported premiums for the first six months of 2009 of $2.25 billion, $1.77 billion, $1.18 billion, and $526 million, respectively. Meanwhile, Florida took the number one seat with more than $2.35 billion in reported premium for the January-June time period. What remains to be seen is how the rest of the year will play out and if Florida will become the nation's largest surplus lines market based upon premium volume.
Other Florida market news is not so positive. For the first time since the establishment of the Florida Surplus Lines Service Office (FSLSO) in 1998, Florida's surplus lines market experienced a decrease in the total premium reported. Comparing premiums from 2007 to 2008, there was a $419 million difference in 2008, which represented a nearly nine percent decrease from the high water mark of $4.7 billion achieved in 2007. Comparatively, the first six months of 2009 displayed a similar downward trend, with reported premium down nine percent compared to the same period last year.
Likewise, the number of surplus lines policies being written in the Florida market has decreased, drifting from more than 877,000 policies in 2007 to just over 843,000 in 2008. Interestingly, though, this four percent decrease represents less than half the decrease in reported premium, indicating the price competition within the surplus lines market as well as competition for business from the admitted and residual markets.
New Capital, New Insurers
Now back to the good news. Not all things in Florida have seen downward trends. On the positive side, the number of eligible surplus lines insurers in the state has been on a steady increase since 2004, bringing the current total to 165. Even through a declining market, surplus lines insurers have taken an interest in Florida. Since 2006, there have been 26 new companies added to the eligible insurers list, bringing in nearly $5.5 billion in new capital and writing more than $116 million in premium to the Florida market.
Other changes in Florida's surplus lines market include the number of newly licensed agents and the ratio of resident to non-resident agents currently licensed. While the total number of surplus lines agents licensed in 2008 saw a minimal increase when compared to 2007, the gap of licensed resident agents to non-resident agents continues to grow. In both 2007 and 2008, the number of newly licensed non-resident agents exceeded the number of newly licensed resident agents, and statistics from the first and second quarters of 2009 indicate that this trend will continue. Since 2004, non-residents have comprised 48 percent of all newly licensed agents. This percentage is expected to grow as we progress through the rest of 2009.
That is a lot of numbers and statistics -- but what does it all mean? It means that the industry sees Florida as having a strong marketplace, despite economic downturns around the country. Our state has caught the interest of surplus insurers and non-resident agents. Florida, too, has its challenges, found in competition with the admitted market and Florida's residual markets, and an ever-changing regulatory climate that almost rocked the surplus lines insurance foundation by challenging its freedom from rate and form regulation.
However, the signs of economic recovery are showing, and the surplus lines markets will strengthen again.
The Florida Surplus Lines Service Office was created by the Florida Legislature as a self-regulating, not-for-profit association to protect its customers' interests by facilitating compliance and providing assistance and information regarding Florida's surplus lines insurance marketplace. Gary Pullen is the office's executive director. He may be reached at 800-562-4496 ext. 102 or gpullen@fslso.com.
